Rupee revival hits IT companies: ICRA

It said the industry is already reeling under pressures like uncertain macro-economic environment, lower deal sizes in digital technologies, cloud adoption and high competitive intensity. The agency said despite a 8.1 per cent growth in USD revenue, IT players have registered a growth of only three per cent in the second quarter of the current fiscal, due to the rupee appreciation of four per cent during the quarter. Due to the difficulties on the currency front, the agency said the USD 160-billion industry will be able to notch a mid-to-high single digit growth till FY20. On margins, it said the industry should brace for an impact on margins as price led competition is likely to intensify and will negatively impact the spreads.

“IT Services players profitability also remains sensitive to rupee depreciation vis-a-vis major currencies such as USD, GBP and Euro and the same too will have an impact,” it said. Its vice president Gaurav Jain said future growth will be supported by higher spend on digital technologies, continued cost benefit offered through outsourcing model and market share gains for the Indian IT sector. “While companies have increased spending on digital technologies and awarding new contracts, the overall IT budgets have moderated leading to lower incremental spends,” he said.

Over the next decade, the agency expects consolidation in the sector due to the margin pressures.